Here's Why The Spa Technology Industry is Ripe for Consolidation

// Photo Credit: DisobeyArt/iStock/Getty Images Plus (DisobeyArt/iStock/Getty Images Plus)

The spa technology industry is currently characterized by many small brands and a only few big names. Driven by the fragmented nature of the spa tech market, new technologies displacing legacy technologies, venture capital interest in the industry, and companies looking to purchase market share and revenue, it's safe to say the industry overall is ripe for consolidation. 

The spa tech industry is a fragmented industry—meaning it's an industry in which many different companies are competing. The spa tech industry directly falls into this category as a niche marketplace primarily made up of numerous small players. The industry’s fragmented nature means there are fewer barriers to entry in the market and plenty of opportunity for major players to emerge through acquisition—market conditions that fuel consolidation.

Also driving consolidation? The development of cloud-based solutions in the spa tech industry. These solutions are taking market share away from outdated, on-premise solutions. On-premise spa management technology includes those solutions that require companies to store and access data on their computer’s hard drive and servers. Cloud-based solutions, in contrast, allow businesses to run their business over the internet without having to invest in IT infrastructure. Companies offering these solutions continue to take market share from on-premise providers because they offer enterprises convenience, accessibility and ease-of-management. The rapid adoption of cloud-based technologies has many on-premise solution providers actively shopping for potential buyers in their desire to exit the market.  

Consolidation in the spa tech industry is also increasing as a result of venture capital interest. The spa tech industry is seeing a lot of activity by venture capitalists (VCs) buying up companies in their quest to find a unicorn, defined as a privately held startup company valued at over $1 billion. Unicorns, as the name implies, are difficult to find, so VCs are looking to get to that valuation through acquisition of multiple spa tech companies. This VC interest in the spa tech industry was recently illustrated by the Vista Equity Partners deal to acquire Mindbody for $1.9 billion. 

Market share and revenue growth are key drivers of consolidation in any industry, and the spa tech industry is no exception. Consolidation allows companies to grow their customer base and/or acquire new and better technologies to increase their revenue streams. 

Mergers and acquisitions in the spa management technology market will continue to help large companies get larger in their drive to increase valuations, reduce costs, grow their customer base. However, an industry ripe for consolidation like this also provides new opportunities for smaller, nimble cloud-based companies to thrive if they are able to innovate faster with new product lines and provide better customer experience than their larger counterparts.


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